Understanding your financial options during a TB breakdown
When your farm experiences a bovine TB breakdown, the resulting restrictions can create significant financial pressure. However, several compensation schemes are available through the Department of Agriculture, Food and the Marine (DAFM) to help manage the economic impact. This article outlines the key financial supports available and how to access them.
On-farm market valuation
The primary compensation mechanism is the On-Farm Market Valuation scheme, which applies to all reactor animals identified through TB testing. This scheme operates with specific valuation ceilings:
Standard reactor animals: Maximum €3,000
Stock bulls: Maximum €4,000 per breakdown
Pedigree stock bulls: Maximum €5,000 per breakdown
Importantly, farmers can claim tax relief for compulsory stock disposal if they replace the animals within four years and defer the tax even if the stock is not replaced. For in-calf animals, the compensation rate is determined by post-mortem examination at the slaughter facility.
Tax implications of TB compensation
Understanding the tax implications of any compensation received for the compulsorily disposal of cattle is crucial for financial planning:
1. Stock Relief and Reinvestment
Where a farmer receives any income by virtue of the compulsory disposal of cattle that farmer may elect to have the ‘profit’ they make on the disposal of those animals deferred over a 4-year period. The profit is the excess of the proceeds on the disposal of the animals over the value that they were held in the accounts.
The 4-year period can commence in the year the compulsory disposal of the cattle occurred, or it can commence the following year. For the 4-year period the farmer is deemed to have taxable income of 1/4th of the profit deferred, and tax is payable. However, if it is the farmers intention to reinvest the ‘profit’ on the disposal then they will also be deemed to have stock relief equal to the deferred income. Essentially, they will not pay tax on this deferred income if they fully reinvest within the 4 years.
If they don’t fully reinvest all of the profits on buying replacement stock, then any shortfall will come off the deemed stock relief in the later years.
Let’s take an example whereby a farmer generates a ‘profit’ of €40,000 on the compulsory disposal of cattle. Initially, the farmer plans to reinvest the full €40,000 in replacement stock over the next four years. However, by the end of this period, only €25,000 has been reinvested. Here’s how the tax treatment works year by year.
| YEAR | Deemed income | Stock relief | Taxable income | Tax treatment |
|---|---|---|---|---|
YEAR 1 | €0 | €0 | €0 | No tax is payable in the first year because the farmer elects to defer the €40,000 profit over four years. |
YEAR 2 | €10,000 | €10,000 | €0 | The first quarter of the profit (€10,000) is deemed as taxable income. However, since the farmer has reinvested some of the profit, they receive matching stock relief of €10,000, meaning no tax is due. |
YEAR 3 | €10,000 | €10,000 | €0 | Again, €10,000 of income is deemed taxable, but stock relief covers the full amount. No tax is payable this year either. |
YEAR 4 | €10,000 | €5,000 | €5,000 | The deemed taxable income remains €10,000. However, as the farmer has only reinvested €25,000 out of the €40,000, the stock relief is reduced. This year, stock relief only covers €5,000, leaving €5,000 subject to tax. |
YEAR 5 | €10,000 | €0 | €10,000 | The final €10,000 of deemed income is fully taxable because the remaining profit was not reinvested. No stock relief is available in this year. |
2. Exit from farming considerations
If the election to defer the income is made but within the 4-year period, the farmer decides to fully de-stock and cease farming entirely then in the year of cessation any amount of the deferred income which has not yet been charged to tax will become subject to tax in that year. Careful thought needs to be given to decision to fully cease farming if the election has been made as the additional income in the year of cessation may bring the farmer up from the low rate of tax to the high rate of tax.
Income Supplement Scheme
The Income Supplement scheme provides monthly payments for farmers who lose a significant portion of their herd. You become eligible when:
More than 10% of your entire herd is removed as reactors, or
At least 10% of your dairy cows are removed as reactors
The monthly rates are:
Dairy cows: €55 per reactor animal
Suckler cows: €38.09 per reactor animal
Other cattle: €25.39 per reactor animal
This supplement is paid automatically by DAFM without application, calculated monthly in arrears from the date your herd meets the eligibility threshold. The supplement is taxed as normal income as not compensation for the disposal of stock.
Hardship Grant Scheme
The Hardship Grant operates during the winter period (November 1st to April 30th) and requires specific application. To qualify, you must meet these criteria:
Your holding must be restricted for at least 60 days
You must have no off-farm income (note: state pension recipients remain eligible, however private pensions are classed as off-farm income).
A full herd retest must be completed
The monthly rates are:
Suckler cows: €38 per retained animal
Dairy cows: €25 per retained animal
Other cattle: €25 per retained animal
Subject to a maximum payment of €250 per month
To apply, request form ER97 from your Regional Veterinary Office (RVO).
This grant is taxed as normal income as not compensation for the disposal of stock.
Depopulation Compensation
In severe cases where full or partial depopulation is necessary, additional compensation is available for the mandatory four-month stock-free period:
Dairy herds (cows/in-calf heifers/stock bulls over 12 months): €220 per animal
Suckler herds (cows/in-calf heifers/stock bulls over 12 months): €152.36 per animal
All other animals: €76.16 per animal
As the compensation is for the disposal of stock the income can be deferred.
Additional financial considerations
TB-related tests beyond your annual herd test are paid for by DAFM
TB breakdowns qualify as Force Majeure for most DAFM schemes
The duration of restrictions will depend on test results, with a minimum requirement of two clear consecutive tests
Planning ahead
To protect your financial position during a TB breakdown:
Maintain detailed records of all affected animals
Contact your RVO promptly regarding any planned animal movements
Consider the impact on cash flow and discuss options with your financial advisor
Review your eligibility for all available compensation schemes
Keep track of testing dates and requirements to minimize the restriction period
Banking - Early engagement is also advised with your bank if you have repayment obligations that may be affected by the breakdown
Understanding and actively engaging with these support mechanisms can help manage the financial impact of a TB breakdown on your farm business. Early engagement with DAFM and proper planning are essential for maximizing available supports while maintaining business continuity.